Using Secured Credit Cards to Rebuild Credit

When a person has bad credit and wants to rebuild it, they will find that obtaining an unsecured credit card is nearly impossible. Fortunately, secured credit cards are designed for such people. Such a card requires a security deposit, and the amount of the deposit usually translates into the credit line on the card. Using a secured card to rebuild credit is pretty straightforward and simple to do.

Finding a Card

Most banks and other financial institutions offer secured cards on top of their normal credit card options. All cards that are secured will require some sort of deposit, which typically ranges from $100 to $10,000. Of course, the trick with these cards is that a person can only obtain a line of credit equal to or less than the amount that they put down in the beginning. All national banks offer these cards while most local banks and credit unions will too.

How it Works

Secured credit cards work just like an unsecured card. At the end of the month, the cardholder will get billed for any purchases they have made, including interest. All of this is reported to the three credit bureaus as if it were a regular credit card, which allows a person to rebuild their credit history and credit scores. So then, these cards are no different from a typical credit card save for the fact that the bank holds the security deposit so that it can’t lose thousands of dollars if a person misuses the secured credit card.

Downsides

There are very few downsides to these types of credit cards, but it is just as easy to abuse them as it is to do so with regular cards. For instance, a person could hurt their credit if they don’t pay off this card, and many people ruin their opportunity to rebuild credit. Also, a cardholder can easily forfeit their original deposit if they don’t pay their bill each month. These cards might come in handy, but they are easy to abuse like any other line of credit in different ways.

Rebuilding Credit

The path to credit rebuilding is a long one because the history and scores won’t change overnight. In fact, it can take months or years to fix everything, depending upon how bad a person’s credit is to start out with. Most people can see improvements within the first few months of using a secured card. Unfortunately, those who mismanaged their finances astronomically will find that it takes many years to repair things. Either way, the best way to build up credit again is to pay bills on time and keep a low balance on the credit card.

Are they worth it?

For some people, secured credit cards are the only option they have, and these cards are great for individuals with really poor credit. Obtaining a card is pretty easy, assuming the person has the security deposit available. These cards come with more conditions, but a person may not have the chance to obtain an unsecured card.

 

Richard Towler has been helping consumers since early 2007 by running a network of consumer finance comparison websites in the USA and Australia. In a market where consumers are overwhelmed with many offers all claiming to be the best the network of sites including Secured Credit Cards 4U which aims to make financial products such as credit cards more transparent by comparing the key features side by side. In addition to secured cards the site compares products such as prepaid credit cards and credit cards for bad credit.

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Why You Need to Start Paying Extra on your Mortgage

The recent turmoil in the housing and financial markets has led many people to wonder where they should invest their money. While the idea of home-ownership as the safest investment people can make has been turned on its head, a home still has many benefits over other types of investments. If anything, the lesson from the Great Recession should be that mountains of debt, whether a mortgage, credit card, or school loans, puts you at a disadvantage when markets change. This article will take a look at why reducing your mortgage time frame and making extra payments is a smart way to save and invest your money.

To begin with, it is important to understand that the extra payments you make on your mortgage should only be for long term savings, and after you have built a 6 month emergency fund. This is not money that you will have easy access to until you sell your home. With that in mind, the next step is to find out how much extra you can pay each month. Armed with an online mortgage calculator, you can quickly see how small payments of $100 to $200 dollars extra each month can save you drastically over the life of the loan. Here are a few of the ways early payments help you:

Builds your Equity

Mortgages give you more leverage on your equity as opposed to renters whose get no benefit from their payments. By paying a little bit more on your mortgage each month, you are growing your equity faster which will give you the option to acquire credit at lower rates with ease as you are viewed as a qualified risk for any lender.

Reduced Amortization Period

As a mortgage payer, keep in mind that the bulk of the amount you are scheduled to pay each month goes to the interest charges. Making extra payments not only significantly cuts down on your principal but also positively impacts your amortization period, and can save you tens of thousands of dollars over the life of the loan.

Better Return Than Savings

Rather than letting your money sit in the bank, opt to add to your mortgage payments when you have money that you will not need access to for many years. Most bank accounts offer less than a 1% interest rate, while your mortgage company is charging you 6% for the loan. That means that making an extra payment will give you a 5% better return than your savings account can offer.

Owning a home takes time, patience, and a huge chunk on your earnings, but by simply preparing ahead of time and paying more than what is required, you can make the experience all the more secured and gratifying.

If you would like a handy online mortgage calculator with taxes included in the computation, then check out MortgageCalculator.org. You will be able to quickly see how making extra mortgage payments can increase your savings and drastically reduce your loan period.

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